Editorial: Piling insult upon injury

While the Obamacare enrollment website’s failures are front-page news, glitches in a California government computer system are actually putting some of the unemployed in financial jeopardy. “Problems are growing worse for the state's Employment Development Department after a new computer system backfired, leaving some Californians without much-needed benefit checks for weeks,” the Los Angeles Times reported.

Most Californians pay for state unemployment insurance through mandated paycheck withholding. On your pay stub, it’s the item marked, “STATE SDI CA.” SDI stands for “State Disability Insurance.” Injured workers depend on their disability checks to make ends meet until they can return to work.

The Times found that “as many as 300,000 claimants” have not received their payments. The new computer system cost a shocking $110 million, double the original estimate. While less than the reported $394 million the Obama administration spent on the malfunctioning HealthCare.gov, that’s a national-scale operation designed to sell health insurance to millions of Americans.

“Big projects are hard,” Jim Harper told us; he’s the director of information studies at the libertarian Cato Institute. “There isn’t any way to get around that. It gets harder when you have to integrate with many different agencies. Healthcare.gov was fated to fail from the start. With complex processes, technology just makes it harder.”

Mr. Harper said that the way to reduce problems is to make sure “the most appropriate level of government is the closest to the people. When you have the big federal government, or a large state like California, things will have to be very complex.”

Californians like to boast that we’re the “ninth-largest economy in the world.” But being such a behemoth has its drawbacks, too, because of the equally massive size of our state government.

The private company hired to build the computer system is Deloitte Consulting, headquartered in New York City. The firm has a problematic record in this state. “In 2003, California estimated it would pay $58 million to upgrade its 30-year-old unemployment benefits system,” the Times reported. “By the time the state awarded Deloitte the contract in 2010, the cost estimate had grown by more than $30 million.”

And Massachusetts’ disability compensation system, also provided by Deloitte, suffers many of the same problems as California’s. The $46 million upgrade is two years behind schedule and $6 million over budget.

In Sacramento, the Assembly Insurance Committee is planning a hearing before the end of the year. Sen. Anthony Cannella, R-Ceres, wants the Senate Labor and Industrial Relations Committee also to investigate. “We keep hiring the same company, and they keep having the same issues,” he said. “At some point, it's on us for hiring the same company. It's faulty logic, and we've got to get better.”

But these committees also should look at shifting some appropriate operations to private disability insurance providers. Because they are smaller, more focused and more adaptable, private solutions often are more effective and more attentive to the needs of customers. As with health insurance, more government involvement isn’t necessarily the best medicine.

CORRECTION

Due to a reporting error, an Oct. 28 editorial, “Piling insult upon injury,” mistakenly mischaracterized the Unemployment Insurance payroll tax as being funded by employees, when in fact, it is funded by employers.

A spokesman for the Employment Development Department also asserted our editorial “referenced an inaccurate statement in a preceding Los Angeles Times article that stated that ‘as many as 300,000 claimants’ have not received their unemployment payment.” But according to Mark Lifsher, who co-wrote the Times story, “[t]he 300,000 number came from the EDD’s own internal emails that [the Times] got as a Public Records Act request.”

A spokesperson for the EDD said the 300,000 figure was explained to the Times as “only an estimate” and that the actual estimated backlog is 148,000 claims.

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